The Trump family–backed crypto venture World Liberty Financial is again drawing scrutiny over its power to freeze and reassign user funds, despite branding itself as a “community-governed” platform.
On Wednesday, the project said it will redistribute assets linked to a pre-launch phishing incident that exposed seed phrases for what it called a “relatively small subset” of wallets. WLFI maintained that the breach stemmed from “third-party security lapses,” not flaws in its platform or smart contracts.
“This was not a WLFI platform or smart contract issue. Attackers gained access to user wallets through third-party security lapses,” the team wrote on X.
Only users who have completed Know Your Customer (KYC) checks will be eligible to have their assets reallocated. Wallets belonging to non-KYC users will remain frozen. WLFI initially locked the affected accounts in September while investigating the breach.
WLFI blacklisted 272 wallets, 215 of which were tied to a phishing attack, while 50 of those wallets reported being compromised.
“We stepped in preemptively to stop hackers from draining funds and are working with the rightful owners to secure and move assets,” WLFI wrote in a Sept. 6 post on X.
Cointelegraph has reached out to WLFI for information on the total value of the assets involved.
Users divided over WLFI’s control of funds
Reaction on X was mixed, with some users criticizing the platform’s ability to freeze and reassign assets without a decentralized governance vote.
“I think it’s hilarious how everyone is cheering that you can rug or lock any wallet on your own protocol. The entire ecosystem is dependent on your security. Everyone will get phucked in the end,” wrote pseudonymous blockchain developer flick in response to the update.
Others viewed WLFI’s actions as a sign of accountability, noting its efforts to compensate victims of the September phishing attack.
“Good to see a project actually taking responsibility instead of hiding behind ‘not our fault’. User safety > everything,” wrote crypto trader DefiBagira in a Wednesday reply.
